Africa-Press – Namibia. THERE are many items analysts expect finance minister Ipumbu Shiimi to table in the national budget today, but what they definitely don’t want to see is a bunch of lofty promises.
Shiimi is expected to table the 2022/23 national budget this afternoon, his third, since his appointment in 2020. Expectations are that he will use Covid-19 as the scapegoat for the high national debt, low state revenue and a high budget deficit.
Civil servants should not expect a salary increment either. In the last fiscal year, Shiimi tabled a N$69,7 billion budget, and a much lower one is expected for this year. This is largely because it is expected that the state will continue to follow the fiscal consolidation path.
“The total expenditure ceiling is budgeted to decrease in 2022/23, in line with fiscal consolidation efforts,” said PSG Namibia research analyst Michele Louw.
FirstRand Namibia’s Ruusa Nandago agreed that the government will continue its fiscal consolidation programme as a means to improve the debt sustainability position.
“This will be done through containing nominal expenditure by curbing wage increases, freezing the hiring of non-essential staff, exploring state-owned enterprise reform, reducing procurement expenditure on goods, services and subsidies and reductions on non-essential capital outlays,” said Nandago.
Simonis Storm analyst Theo Klein expects the development budget to remain constrained due to the rigidity of the operational budget. High Economic Intelligence head of research Salomo Hei believes the tightening of belts should not continue.
“We are perhaps the only country in the world that cut our budget during a pandemic and have chosen fiscal consolidation over saving an ailing economy.”
Hei would like to see labour certainty in the agri-sector to address the high unemployment rate. He said the Witvlei abattoir should be reopened and green schemes should start operating. One thing he warned against are promises in the dark.
“We don’t want lofty promises, but tangible economic outcomes,” he said, adding that government investment must see returns and accountability for every dollar spent, and called for the targeted funding of small businesses.
On taxes, Nandago said, besides annual sin tax increases, she does not expect increases on personal and corporate income tax which would increase pressure on consumers and businesses.
PwC Namibia tax leader Chantel Husselmann said she expects various earlier proposed tax amendments to be discussed, and the expected implementation dates to be communicated. These include withholding tax on dividends, and increasing the threshold of tax allowable deductions to pension funds, retirement funds and study policies.
Husselmann added that it would be ideal to have guidance on the debt-equity ratio for thin capitalisation, as well as the taxing of trusts and the possibility of different types of trusts being subject to different tax rates, made clear.
Other items such as the 15% VAT on listed asset management fees, the zero rating of sanitary products and amendments to the VAT registration requirements for entities with no immediate trading activity, should be covered by the minister.
Husselmann said some of the proposed amendments may have a significant impact on business, which is why it’s important that such amendments be communicated in advance of the proposed implementation date(s).
“Specific cause for concern in this matter arises in the financial services sector where reporting systems would require updating in order to accommodate the calculation of withholding tax on dividends.”
The introduction of new and sin taxes would cause government debt to shrink but Klein and Nandago both expect debt levels and the budget deficit to remain elevated at around the 7% of GDP, given weak revenue performance.
“As a result of higher budget deficits, debt levels will also remain elevated north of 70% of national output,” said Nandago.
Louw expects the budget deficit to narrow from a larger deficit in the preceding fiscal year as economic recovery gains traction relative to a very low base.
“We still foresee some moderate fiscal slippages in the medium term, given the pressure from sharply lower customs union revenues, the slow pace of fiscal reforms and a tendency for wasteful expenditure as well as rising interest payments.”
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